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It takes more than a good idea to make it in business anywhere. But to make it in Africa, where infrastructure is often poor, the regulatory environment confusing at best, and the currency markets unstable, an entrepreneur must be armed with even more creativity, determination, and patience.
According to panelists at the conference seminar on "Doing the Background Work: Opportunity Identification, Validation, and Writing a Business Plan," opportunities do exist in Africa. But finding and exploiting them is not the same as building a start-up in Silicon Valley. And like entrepreneurs anywhere, business adventurers in Africa have to be flexible.
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| Chevron, Mobil, ADM, DeBeers, they're pulling billions out of that continent managing the infrastructure risk. So it can be done. | |
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| —William Jimerson, MUSA Capital |
William Jimerson, for instance, directs MUSA Capital, a $40 million venture capital firm dedicated to African business. Another panelist, Yussur Abrar, is president and CEO of Warsun International Communications, a company trying to build the Internet backbone for Africa in the U.S.; Warsun has deals with customers in 10 companies. But neither started out to build the businesses they're now running. Abrar began by selling international phone cards. Jimerson and his partners had planned to build a fully integrated telephone operating company on the continent.
"Talk about change, we went through several iterations, several failed business plans and ultimately ended up where we are today," Jimerson told the panel audience. His company is currently working with Alliance Capital to raise a $350 million Africa fund.
The four Cs
Jimerson described his philosophy on entrepreneurship in Africa through what he called the Four Cs: cash, credibility, contacts, and change.
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"I'm not just talking about start-up cash. I'm talking about staying power," he said. Sticking around even when the ideas weren't generating a payoff, when he was wearing four-year-old suits and "my shoes were worn down—I had tape on the bottom of my soles," demonstrated to investors that he was a credible player. And without contacts, Jimerson said, "businesses and great business plans are not fundable."
Abrar agreed with Jimerson on a number of points. "Unless you have alliances, you will not be able to survive," she said. "I look for really good people, local partners, who know their markets very well."
Abrar, a U.S. citizen who was born in Somalia, added that when she was growing up in Africa, those who were idolized were often government employees who knew how to work the system to get rich quickly. Changing that perception, and instilling entrepreneurial values, takes time.
"There is no 'get rich quick'. I am in my sixth year of operation and I'm finally starting to make money. It's amazing to me, I'm actually seeing money coming in."
And she reminded students that the U.S. infrastructure did not appear out of nowhere. "The infrastructure in this country…the nice buildings, the telephone systems, and everything that's working beautifully in this country did not just come overnight like this. It came through hard work. It came through people who were willing to sacrifice and to take a long-term view," she said.
African tool kit
Annika Lundgren, Africa program manager for E & Co., is trying to assist entrepreneurs with a long-term view at the beginnings of their journeys. E & Co. provides development services and early-stage seed capital to entrepreneurs starting clean-energy companies.
So far, E & Co. has invested $7.6 million in more than 58 companies in 28 countries; they've reviewed more than 300 proposals. But more than providing capital, E & Co. provides training to turn good ideas into solid businesses. The company provides a "tool kit" to help point them in the right direction.
"It's a combination of these services that can really take early entrepreneurs to the point where they can actually implement a stable business," Lundgren said. What the entrepreneurs she works with are often lacking, she said, is a clear map showing how to get from funding to profitability, of how to use their funding to grow a sustainable business.
"We rarely see a good implementation plan," she said. "Money doesn't make your business plan."
"Most of the business plans I've read have very weak strategy sections," agreed Ndidi Okonkwo (HBS MBA '99), executive director of the FATE Foundation, a nonprofit organization in Nigeria that helps aspiring and emerging entrepreneurs through training, networking, and financing.
Okonkwo also said many students tended to minimize the risks they were facing and were overly optimistic about how quickly they could expect a payoff. "Every single entrepreneur who graduated from the FATE school… was going to break even in the first year," she noted with a skeptical smile.
Selling the Africa story
But even the most solid business plan does need funding. And many investors are too leery of the risks involved in investing in Africa to consider even the best of plans, according to the panelists.
Cyrille Nkontchou (HBS MBA '97), founder and managing director of LiquidAfrica Holdings Ltd., a continent-wide Internet financial application service provider, said even at the height of the Internet funding boom, investors who eagerly poured money into Silicon Valley start-ups were reluctant to take a chance on his plan.
Nkontchou said he realized he was looking for cash in all the wrong places. He turned his attention to investors who were more familiar with Africa than with Web technology. "It was actually easier to basically look at African-dedicated sources of funding and sell them on the Internet story," he pointed out. "It was extremely hard to access money from the European or American type investor. The African story remains the biggest obstacle."
According to Jimerson, entrepreneurs shouldn't even bother to approach funding sources that can't cope with the infrastructure problems, political uncertainty, and currency stability that exist in many African countries.
"You won't get funded from sources that believe those three areas of risk [and] 'that country Africa risk' are insurmountable. You're wasting your time," he said. "You're better served by spending your time with your business plan, with your pitch, with funds or sources of funding that are dedicated to the continent. They've accepted the risk, they're willing to take the risk."
Which is not to say there's no money to be made in Africa, Jimerson added.
"Let's understand something: Chevron, Mobil, ADM, DeBeers, they're pulling billions out of that continent managing the infrastructure risk. So it can be done."
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